Instructure is now a decade old as a company and faces a crucial test this year with recent changes to their executive management team and the need to scale both Canvas (academic LMS) and Bridge (corporate learning LMS). The long-time head of sales, Marc Maloy, and head of marketing, Misty Frost, left Instructure in the fall. The company eventually hired a new head of marketing, Bjorn Eriksson from the world of corporate HR, in January. After a months-long search, Instructure did not directly replace Marc with a new head of sales, but instead they hired a new president, Dan Goldsmith, who also has sales leaders reporting directly to him. With this move, Mitch Macfarlane, the long-time chief operating officer and former head of client services, will be leaving the company this summer.1
We've written about previous executive changes for Instructure - when their two founders left the company and when their CTO departed after just one year - but in each case the company managed the transitions and came out stronger in the end. As we have shared in our LMS Market Analysis service and on e-Literate, the Canvas track record is remarkable in terms of not losing customers and gaining new customers from most other LMS providers.
But the executive changes over the past year come at a time when Instructure faces new challenges in product development and implementation support. At InstructureCon 2016, the company announced their next-generation quizzing platform, Quizzes.Next, stating that it would be "made available to you over the course of the next several months". Last summer at InstructureCon 2017, Quizzes.Next entered a limited beta program, but the new set of tools is still not fully in production. To our knowledge, this might be the biggest product schedule miss in the company's history, and it will be quite interesting to see what happens with this summer's InstructureCon.
In addition, we have had several people contact us privately, even before the most recent management change, telling us about a new level of frustration in implementation projects and product upgrades. None of the tales were extreme, but they were unusual for Canvas clients and in general spoke to distractions from staff and lack of clear answers and updates.
The press release announcing the hiring of Dan Goldsmith included this description:
With more than 20 years of experience in software and services, Goldsmith's career is marked by directing high-performing global teams and achieving outstanding penetration and growth in challenging markets. Goldsmith spent the last eight years as a senior executive at Veeva Systems, a cloud-based software company, where he started and ran Veeva's international business, led the company's strategy in new markets and products, and most recently was responsible for Veeva's global engagement and growth in strategic accounts.
"It is an exciting time for Instructure. We are well positioned for success as we focus on the continued growth of Canvas, expansion of Bridge, and international execution," said Josh Coates, CEO of Instructure. "Dan's energy, creativity and proven track record in driving go-to-market strategies and rapidly scaling businesses make him a tremendous addition to Instructure at the perfect time to lead us through our next phase of growth."
Goldsmith was one of the first 50 employees at Veeva. He helped lead the company through a successful IPO and a growth path to a $10 billion market cap. Prior to Veeva, he worked in various executive positions at top companies, including Accenture, PwC and IBM. During his years in management consulting, Goldsmith led initiatives in global markets and developed new offerings. Goldsmith will have an immediate impact on Instructure's strategy. His initial focus will be on market growth, with the sales leaders reporting directly to him.
This was the setup for an interview that we had with Josh Coates, the CEO of Instructure, last week. Given our focus at e-Literate on education markets, we in particular wanted to ask about how the company is balancing the needs of Canvas and Bridge.
Coates came prepared for the interview, and up front he made the point that the "vast majority of company resources" are allocated to the academic markets and that this is their foundational business. After we pointed out that the majority of discussions on quarterly earnings calls focus on Bridge, Coates noted that Wall Street is overly focused on corporate learning markets and unfortunately takes Canvas' academic market performance for granted. He does not do so, but some of the investor community seems to.
The primary selling points bringing Goldsmith to Instructure are that he helped Veeva grow into a $10 billion company, having joined as one of first ~40 employees, and that he specifically helped them grow international markets. According to Coates, Goldsmith spent his first three years opening up the Europe, Middle East, and Africa (EMEA) markets, and that yes, his international experience is a big reason for Instructure recruiting him.
We have noted at e-Literate that Canvas really began international expansion just 3-4 years ago. According to our current data, Canvas leads in higher ed adoptions in Europe and Australia / New Zealand, but interestingly, D2L is beating Canvas in Latin America higher ed adoptions despite Instructure having a bigger investment in its regional office in São Paulo. At some point Canvas' market share growth rate in North America will have to flatten out and international markets will naturally increase in importance for company finances. While market wins in Europe and Australia / New Zealand are impressive, Instructure will need more aggressive growth in other markets, and clearly Goldsmith is being tapped as a catalyst to increase sales overseas.
We pointed out that Goldsmith had no education background and appears to be more closely aligned to corporate learning markets than higher ed or K-12 markets. Coates responded that Goldsmith has done quite well for himself at Veeva but is also passionate about education, as evidenced by his experience as the chair of the Montgomery School board of trustees. Coates acknowledged that this is not deep academic sector experience and that the company will need to give Goldsmith a big education on higher ed and K-12 markets. If we had a dollar for every time we heard of a rich dude who is passionate about education, well, we'd be rich dudes who are passionate about education. It is good to hear, however, the acknowledgement that the new executive brings rich software company scaling and international market growth experience but not domain knowledge of the academic markets for Canvas.
We asked for an update on Quizzes.Next - when it will be generally available (GA) and whether the schedule challenges are related to the executive changes. Josh Coates assured me that no executives are working on the code, but Jared Stein, VP of higher ed product strategy, answered more directly.
Quizzes.Next's GA release is scheduled for Summer 2018. This is later than planned because we underestimated the complexity of building assessments entirely as a micro-service at the level of quality we set for ourselves and our users.
The executive management team over the years has played a big role in establishing the company culture that is a large part of Instructure's success. Now that the three M's (Marc, Misty and Mitch) are out, the question is not whether the culture will change, but how. Coates' acknowledges this reality and trusts that Instructure's internal rudder is strong enough to keep the company on course.
There are two company risks that stand out in trying to balance Canvas and Bridge. First is that complacency sets in not just with some in the investment community but with Instructure itself, and they begin to take their strong position in the academic market for granted. Second, and related, is that resources and talent end up flowing disproportionately to the corporate learning market given its increasing importance. These are risks to watch and not observations of actions, however, and Coates was emphatic that the academic market will always be the foundation of Instructure's business. The corporate learning market is significantly larger than the academic market, however, and Coates estimated that in ten years or so, corporate will likely drive a larger portion of Instructure's revenue.
It should be noted that growth in corporate does not have to come at the expense of the academic market. It actually has the potential to strengthen product offerings in higher ed and K-12 as Instructure gains deeper insights into teaching and learning more broadly. There is also the potential for convergence, or at least cross-pollination, in these markets as the profile and needs of learners evolve.
We'll keep a close eye on academic LMS market trends in the coming months for signs of new developments. For the near term, at least, Instructure's success is predicated on the continued success of Canvas in higher education and K-12 despite the quarterly investor calls skewing toward the corporate learning markets and new management hires with experience outside of the education sector.
- Disclosure: Instructure and D2L are subscribers to our LMS market analysis service and were sponsors at our recent Empirical Educator Project summit. [↩]